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Originally Posted by sebastian_dangerfield
Except that 3 is usually selected solely because it’s the lazy path of least resistance. These businesses could innovate, could build planes that don’t crash, but why spend on that when you can jack your bonus, tied to share price, with a stock buyback?
What is IBM other than a small maker of niche software connected to a massive buyback machine? It’s a repository of cheap money buying it’s own stock.
And while these companies do this their actual products and services turn to shit. Boeing cut corners. Why? To gain a little bit of margin. Where might it have been had it instead invested in making a superior product? If it spent money wasted on buybacks on better R&D and production, it wouldn’t see all of its orders for planes being cancelled.
Wall Street is a casino. And now businesses are following suit. Who cares for succeeding by providing value when it’s so much easier to just borrow cheap money and buy your stock.
Don’t confuse Boeing with Apple. Apple does strategic buybacks out of funds on hand. Boeing and those like it often used borrowed money to fund buybacks.
The difference? Cook thinks for the long haul and is focused on products. Boeing is a financial company annoyed it has to make planes.
So yes, fuck Boeing. Let them burn. Ch 11.
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We weren't talking about Boeing, we were talking about airlines. They are *all* going under without government help. Is that bad management? Not if all of them go. Boeing is a different story, one of obviously poor management.
You say that businesses select buybacks "solely because it’s the lazy path of least resistance." You don't know that. For some, maybe, but cash is cheap. Businesses that see a way to innovate aren't struggling for cash to invest in something new.
You seem to think that buybacks somehow fool people into thinking the business is more valuable. Who is fooled? Institutional investors understand what's going on. If they think it's a bad strategy, they can sell the stock and it goes back down.
Why is anyone better off if a business chooses to pay a dividend instead of buying stock back?
